Imagine being an empirical, free-market thinker in a socialist town.

27 December 2009

I’ve mused out loud to friends that the recent run-up of the stock market was not based on confidence in the economy or the individual companies, but rather an expression of the value of a dollar. It’s fairly simple: investors see the currency losing value over time (due to gov’t spending), and so convert their currency into assets. It’s basically like buying gold, i.e., an inflation hedge.

By my theory, the fundamentals of the stock market haven’t changed – the companies’ prospects haven’t improved dramatically – but it now takes more dollars to buy the same amount of stock. The “rising” market is anticipating inflation, not recovery.

But since I hadn’t heard any smart people saying such a thing, I figured there wasn’t much to my theory. But, cue horn-tooting, the WSJ’s numbers seems to support it: “Adjusted for Inflation, Dow's Gains Are Puny”.

How much of the market’s recent 20% gain is simply a precursor of (real) inflation?

16 December 2009

Can I pick them or what? I lived for many years in San Francisco, apparently the worst-run city in the US:

It's time to face facts: San Francisco is spectacularly mismanaged and arguably the worst-run big city in America. This year's city budget is an astonishing $6.6 billion — more than twice the budget for the entire state of Idaho — for roughly 800,000 residents. Yet despite that stratospheric amount, San Francisco can't point to progress on many of the social issues it spends liberally to tackle — and no one is made to answer when the city comes up short.

Funny thing about government – they get paid regardless of how good a job they do. Would you hire a housepainter on those terms? An administrative assistant? Yet we do it with government every day. (We can expect government-run medicine to perform similarly.)

Government spending is poverty. It is the destruction of wealth. Imagine a world of hungry people, where the proposed solution is to take food out back and burn it: governments, local and national, apply the same reasoning to money.

08 November 2009

So a health care reform bill passed the House of Reps last night on a vote of 220-215. Some perspective: after months of full-press political arm-twisting, millions of $ of TV ads, speechifying by a popular and charismatic president, and general demagoguery, over 49% of elected representatives opposed this bill.

That's extraordinary.

It seems to me that no bill should be imposed on citizens when that many people oppose it. 51% forces its will on the other 49%. (And keep in mind that only around 10% of citizens were having trouble getting health care.)

If 51% of the eats meat, should everyone be forced to? If 51% of the population is religious, should that religion be forced on the other 49%?

No -- we are and should be a plural nation. The idea that there is "one right answer" is, frankly, a form of religious fanaticism. It ignores the possibility of diversity; it lacks the imagination to understand that people may make substantially different decisions and that that's OK; it believes that souls must be "saved" against their will.

This truly is a tyranny by a majority, and it is the thinnest possible majority.

--

On the topic: the bill is a tragedy in terms of human lives. There are 300,000,000 people in this country who will die of something for which we haven't invented a cure yet. Saving lives comes not from governmental direction but from technological progress.

The invention of AIDS cocktails and malaria vaccines and statins and MRIs has improved health care more than any government ever has -- and at a lower cost, and to the benefit of other nations and generations. These things should be our focus.

The current bill siphons trillions out of citizens pockets while slowing medical progress. Those trillions will now be subject to corruption, waste, and political priorities. Citizens will be spending as much as they ever have on health care. It's just that they'll have less say in how it's spent.

The supposed goal of the bill is to save money -- to prevent bankruptcies in the event of sickness. Which situation would you rather have: the opportunity to buy a life-saving drug that will break you financially, or the non-existence of such a drug?

Health care costs are increasing because citizens are choosing the expensive option. It's an unavoidable choice, no matter how we massage the rhetoric. The only way to avoid that decision is to eliminate expensive new medicines and procedures. That's what this bill will do.

The worst outcome of sickness is not bankruptcy -- it's death. We're choosing the latter to prevent the former.

20 July 2009

The Republicans are not offering an alternative to the Democratic-driven health care debate.

They may successfully derail the current dreadful bill, especially if the vote is held after the August recess. But Republicans need to build support for health care reform on their own terms.

I offer the following as a bill of rights (or principles) that could gain populist support and would allow the Republicans to say what they are for.

States shall not restrict the ability of their citizens to purchase health coverage from other states.

Employers and individuals shall receive the same tax treatment for health-care expenses.

All members of Congress, and their staffs, shall be required to purchase their own health coverage.

A few notes on each:

One of the current criticisms of our current situation is that there is insufficient competition. (I purchase my own health care and found many providers on ehealthinsurance.com, but let's stipulate that this were true.)

Health care providers currently must be approved by insurance czars in each state in which they want to offer coverage. There are dozens of insurers that would love to sell to you, but they are legally enjoined from doing so. Let them have a chance, and watch choices increase while prices drop.

Our employer-based system of health-care is an accident of history, as well a lesson in unintended consequences. The tax break for employers makes individual coverage expensive by comparison. This hinders labor mobility and makes it harder to move between jobs, as many fear loss of coverage.

If employers and individuals have a more even playing field with regards to buying coverage, that coverage is more likely to be owned by the individual. This will result in more predictable and consistent coverage over one's lifetime. And by removing a barrier to changing jobs, we'll see more career autonomy and entrepreneurism.

This one is somewhat symbolic of course, but important. I do believe that members of government are too shielded from the results of their lawmaking. A little self-interest here will Congresspeople to ensure a healthy market for health-care.

Unlike bureaucrats who prefer "comprehensive" solutions -- those that are so complex as to avoid debate on individual merits -- each of these rights should be debated enshrined in separate bills.

As a political matter, they should be rolled out with in order, each becoming effective one or two years after the previous.

First, establish competition and let the interstate market get some traction. Let consumers see more choices.

Second, scale back the employer tax advantage after consumers see that they have non-employer options. (This is a political calculation.)

Finally, put the Congress on the same footing as the rest of the populace. I could certainly see the argument for doing this first -- it might positively influence debate on the previous -- but it's also symbolic. Best to focus on substance first.

22 June 2009

When discussing the possibility of a “public option” as part of the health care bill being negotiated, we see great example of the power of a label.

For the public option to be an option, it has to be optional. This means that if you don't want to participate, you don’t have to. Can that be the case?

The are two financial possibilities for the public option -- either it is financially self-sufficient, or it is not.

If it is financially self-sufficient, that means it is paid solely by those who receive the benefits. In which case, it's just like any private option; you don't pay Aetna or Kaiser anything unless you sign up.

If the public option is not self-sufficient, this means by definition that non-beneficiaries -- other taxpayers -- are paying into it. In that case, we create “participants” who receive no benefits.

It's hard to imagine that the public option can be anything but the latter.

To compete on price, they need to undercut the private competition. To support this lower price, a self-sufficient public option must be more efficient than the private versions while providing the same level of benefit.

To be more available, it must accept wider range of beneficiaries than the private companies. This means it must accept more sick people -- ie, those with pre-existing conditions.

There is no evidence of government being more efficient, especially in our existing gov’t health systems: Medicare and the VA hospitals.

And by accepting more sick people, obviously their patients will be skewed toward the most expensive.

The only solution to the above is a subsidy from outside the public plan. So really, you’ll be paying into it regardless of whether you benefit. There is nothing “optional” about it. So perhaps we should start being honest in our language.

27 May 2009

The governor's proposal to whack an additional $5.5 billion from state programs stunned even longtime Capitol-watchers with its blunt force. Ending cash assistance for 1.3 million impoverished state residents, for example, would make California the only state with no welfare program.

"Every single first-world nation has a safety net program for children," said Will Lightbourne, Santa Clara County's social services director. "This would return us to the era of Dickens — you'd have to go back to the 19th century to find a comparable proposal."

The extraordinary new spending over the last 8 years -- about 3 times the rate of inflation -- was intended to improve quality of life, no? To provide a safety net, yes?

It's truly ironic, but not surprising. There is nothing charitable about overspending. In fact, it's a triumph of political ambition and narcissism. Our politicians get elected for these promises, their allies get funded by the pork, and they brag about their sense of charity. The citizens, by extension, do the same.

Buying your kids expensive Christmas gifts is pretty cruel if they are hungry in January. But California didn't just do that. We also bought expensive gifts for the hot secretary and our poker buddies.

24 May 2009

Human rights take a back seat to financing the Democratic agenda, once again. Recall that Secretary of State Clinton's first trip in her new role was to China. The message: keep buying dollars and we'll ease up on the human rights talk.

My district Rep, Nancy Pelosi, in the above-linked story, continues that strategy.

13 May 2009

Here's the thing: if you limit the price that a company can charge for a product or service, fewer companies will offer it. So if a credit card company can't charge a 30% rate to particular person, they will simply not offer them credit at all. This is progress?

This is not unlike the hollow complaints about check-cashing shops in poor neighborhoods. Outraged by the high fees? Fine, but if you eliminate those stores then the available options for poor people go from one to zero.

Guess what -- consenting adults use those stores because they choose to. The only way to justify their elimination is to believe that the gov't knows better what to do with their money. Which is to say, we declare them second class citizens.

A thought experiment: if we decide that computer companies are "gouging consumers" by charging, say, $1500 for a laptop, and we make it illegal to charge any more than $1000 for a computer, what would happen? Well, Apple wouldn't exist for one thing. Knock it down to $500 for the sake of justice -- would we have more or fewer computers?

How about declaring it illegal to charge more than $10,000 for a car? More than $5/lb for meat? Who would better off?

18 April 2009

Greg Mankiw cites a phenomenon that I've mentioned before, that fear of future inflation might inspire people to spend today. He talks about it in much more practicable economic and historical terms than I did -- and here I thought I was on to something clever.

The thinking goes like this: it seems clear that the flood of created-from-thin-air dollars currently going into the economy must mean, at some point, those dollars will be worth a lot less. We've doubled the number of dollars but they are chasing the same amount of things.

So a forward-looking person will realize that the value of a dollar is at a high point right now. The dollars in your bank account will buy a lot less in 5 or 10 years. So if you convert those dollars into something more likely to hold its value, you are better off.

And that's stimulative. But it's not the same as improving the country's economic well-being. It's basically a threat by government that your money will be seized if don't spend it. And money spent involuntarily can't be empirically said to create new wealth.

Wealth is defined -- to me -- by voluntary exchange. A person that spends money for a good or service believes that they are better off as a result. Economic benefit is defined by citizens, subjectively, and that's a good thing.

When the government says "you're better off", it's very different than you saying "I'm better off". Which is more persuasive, to you?

14 April 2009

The Speaker of the House of Representatives is paid a salary of a bit over $200,000 [pdf]. The average American citizen's annual federal tax liability is approximately $7000, which means that there are 30 people whose entire yearly tax contribution goes toward paying your salary.

Will you take the opportunity today — out of respect for Americans' difficult economic times, our President's call for a new era of responsibility, and our government's spending priorities — to announce that you will accept a salary of only $1 for the rest of your time in public service?

25 March 2009

How ironic. Three lefty bloggers all talk about the same story at the same time, using the same language, talking about the same people, embedding the same video, and linking back to one another -- and the story is about the right-wing echo chamber.

24 March 2009

Via Instapundit, this post over at the Corner points out something I've noted in my mind for a while: those who advocate greater government involvement in industries such as finance and health care speak as if these are ideas which need to be tried. In fact, they've been tried for a long time in many diverse places. So we have lots of experimental evidence to point to.

One example: the idea that greater regulation would have prevented our current crisis. Yet the source of the crisis -- mortgages -- is one of the most heavily regulated parts of finance. Fannie Mae and Freddie Mac have been attempting to control prices for a long time. And yet the industry imploded. (One might consider the previous sentence without the "yet" and reconsider the causality.)

Many countries around the world have much more regulation, and were not spared. It's like saying that a crime involving an illegal gun is the result of lax gun laws. Hint: the gun was already illegal, as was the assault, and yet the tragedy happened. Making it "more illegal" makes us feel better but elides the cause.

The president has said that "solving" our health care "problem" is necessary for solving our economic problems. Most of the world has socialized medicine. So if countries with socialized medicine are in the same economic straits as we, and perhaps worse, how does it follow that it's a cure?

14 March 2009

Drug legalization seems to be one issue that the adamant left and the adamant right can agree on.

I don't have any personal interest in using illegal drugs. I don't even get exercised about the idea that a person is being deprived if they aren't allowed to legally use drugs.

What I do get exercised about is the idea that we put people in jail for such things. And that we pay enormous sums of money to do so. And that the "war of drugs" empowers government and invites corruption. And perhaps most of all, that drug prohibition empowers thugs and ends lives (think Al Capone).

I don't disagree that drugs are often damaging. Their illegality simply adds a layer of damage on top of that.